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What Organic Dairy Products Can Teach us about ‘Dementia Tax’?

The so-called ‘Dementia Tax’ proposal is symptomatic of prolonged illness in the British healthcare sector affecting FMCG companies. An illness not adequately explored in the general election campaign.

On 8th of June 2017, Britain shall, in a tradition over 200 years old, once again partake in the dance of democracy. The incumbent, Prime Minister Theresa May, a conservative is expected to hold her own against her primary contender, Mr Corbyn (Labour party). One of the most striking facets of the general election campaign has been on the Conservative Party’s healthcare proposal. As per this policy proposal, anyone who receives care in their own home will have to pay for it through the value of their home once they have passed away. This means that the entire value of a person's home, apart from the first £100,000, will be claimable by the state. The opposition has dubbed this proposal ‘Dementia Tax’.

Notwithstanding the politics being played over the issue in the general elections, there is a striking economic backdrop to the saga which will impact the British economy, including the FMCG sector. The impending Brexit negotiations, Brexit itself and the potential gains and losses suffered by the British economy over it is framing the narrative around the general elections. A frail British economy has been grappling with stagnating disposable income, which has also impacted the UK healthcare expenditure. Healthcare expenditure was increasing in UK till 2013 which leads to shift in preference of people towards organic dairy products, as these products are chemicals and pesticides free, therefore the market is gaining attraction from people living in the UK. General election politics aside, there has been a marked decline in the British economy which is hampering healthcare expenditure.

A TechSci Report “Global Organic Dairy Products Market By Product Type, By Region, Competition Forecast and Opportunities, 2011 - 2021”, mentions the strong correlation between rising disposable income and standard of living and increasing consumer spending on lifestyle, luxury and health products. Further on, it also talks about the high input cost involved in production of many FMCG products, such as organic dairy products which drives up healthcare expenditure. An interesting facet of the debate over the ‘Dementia Tax’ can be tied up to the growing trend of preventive healthcare. Disposable income levels dictate one’s dedication to practicing preventive healthcare techniques such as: positive action towards diet, relationships, exercise, health and lifestyle. The lesser the disposable income, the lesser the chance of practicing preventive healthcare, the higher the chance of falling ill which further erodes disposable income. Furthermore, the report also warned about the dangers of counterfeit products; the temptation to buy inferior goods that are produced with the intention to take advantage of the superior value and brand image of the imitated product but may contain impure ingredients in improper quantities or even harmful preservatives and steroids.

While the framing of the debate around the ‘Dementia Tax’ may be tinged by the upcoming general elections, it still shines a flashlight on the interaction between the government, disposable incomes and on the various sectors in the economy. A government which is unable to ease the burden of healthcare spending of its individual constituents may prove detrimental to FMCG companies, given that erosion of disposable incomes would significantly impact the tangential methods applied by people to stay healthy. Not only would it significantly impact the health of British citizens, it may also impact the health of FMCG companies, already on tenterhooks after Brexit. Conversely, if the British economy pulls through, the possibilities for FMCG companies are endless. It will be interesting to see what reforms are carried out in the healthcare sector post the general elections.

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